California Liberals Resurrect Internet Sales Tax Plan
by Capitol ConfidentialIt’s ba-ack! Facing a $20 billion budget gap, California liberals in the state legislature are reviving a tax-hike plan targeting out-of-state, online retailers that has a diverse coalition of web entrepreneurs and business and political leaders fuming.
The proposal, mentioned during a California Senate hearing just last week, would force companies like Overstock.com to collect and remit to the Golden State sales tax where they advertise with California-based websites.
Supporters say it could add needed revenue to the Golden State’s coffers.
Opponents charge that deeming such out-of-state retailers to have “sales tax nexus” by virtue of advertising in the state would constitute a major tax hike that would worsen the state’s budget woes.
Furthermore, several prominent critics of the proposal contend that it could be unconstitutional.
Nonetheless, those tracking the debate say that Democrats in the legislature could attempt to push it through in the coming weeks and months, playing off of widespread concern about the state’s fiscal mess and inability to cover its financial obligations.
Just this month, Americans for Tax Reform (ATR) issued a letter to California legislators noting that a vote in favor of the plan, which was rejected by Gov. Schwarzenegger last year, would be scored by the organization “as a tax increase.”
Other opponents meanwhile are speaking out against the proposal, noting that California is unlikely to in fact collect additional tax revenue, should the plan move forward. In North Carolina, where such legislation was recently instituted, opponents say online retailers stopped advertising with in-state marketing affiliates, such as blogs and websites, rather than collecting and remitting the tax. That example has marketing affiliates themselves arguing that were this tax increase pushed through, not only would it damage their businesses, but it would actually have a negative, as opposed to neutral or positive, impact on the state budget.
Mattias Larsson of Marina Del Rey, California, who runs the website DefinitiveDeals.com, opposes the plan, arguing that his business “will be devastated by the sales/use tax nexus bill,” and adding that he paid “well over $50,000 in California personal income tax last year”—a tax bill that could be lower in future were retailers to yank ads from his site, as has occurred in North Carolina.
Ryan Owen of Santa Monica and Savings.com meanwhile believes that in addition to threatening California’s existing revenue stream from him business, were the proposal to move forward, it would threaten jobs. “Not only will the major merchants not collect the use tax for California, but 25,000 small businesses will suffer, hire less people and pay less income tax,” he said in a statement.
Taxation law and policy experts contend that the proposal may not even be constitutional.
In his letter to California legislators, ATR President Grover Norquist stated that “…current jurisprudence under the U.S. Supreme Court’s ruling in Quill v. North Dakota requires that a business have a physical nexus in a state in order for the state to compel that business to collect and remit sales taxes. However, this measure attempts to circumvent the Commerce Clause by presuming that a company has a nexus if business is solicited through a third-party advertiser in the state.”
The Tax Foundation also noted earlier this year that “Litigation over the constitutionality of Amazon taxes is ongoing, with scholars on the left and right disputing their wisdom and legality.” At issue, specifically, is whether forcing online retailers to collect and remit sales tax places an “undue burden” on them, with the Tax Foundation further arguing that were the plan instituted, “each retailer no matter how large or small [would have to] track 8,000+ sales tax rates and bases. Further, these constantly change and (contrary to common assumptions) are not aligned with even 5-digit zip codes, let alone 9-digit zip codes.”
That, opponents charge, may be the biggest reason why the proposal could prove a bust again in 2010. “Who wants to push through an unpopular tax increase in a state with 12 percent unemployment, when it will decrease revenue, risk jobs, and subject the state to charges that it is behaving unconstitutionally?” one political operative tracking the issue queried. “Even among Democrats, that looks like a bad deal.”
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49 Comments
Funny how crap like this is the sort of thing the Founders intended the commerce clause for, as a way of preventing states from taxing goods from other states but it never gets applied in that manner.
A lot of people who worked on the internet and receive a fair income from affiliate revenues with Amazon or other companies will lose their income. (but they don't count as they will not be collecting unemployment). The state will lose on income tax. It will be a wash for the state, take from one hand give from the other, but it will hurt real people. In my opinion another stupid move from the state.
"Supporters say it could add needed revenue to the Golden State’s coffers…?" So, that's what progressives call a hole, because the word 'tax' is just another word for shovel.
Remove the illegals and the democrats from power and California will explode with opportunities.
The liberal demon-crat's have been busy for a while now down in their dungeon, not to discuss what they can cut back from their pet projects and entitlement programs, but they have been busy conjuring up news ways and revisiting old ways to extract us from our money.
I've heard also they are cooking up corporate taxes because they think Californian's are too stupid to realize all corporate taxes are ultimately paid for by the consumer, because all expenses get passed on to us.
Hear-hear Majiic12. How about a little common sense CA? Stop paying for education, health and services for hundreds of thousands who never contribute to the system. Putting the tax burden on the backs of the productive will yield a little in the short term, but in the long term is will be CA that looses, as businesses develop workarounds or go out of business altogether.
"Supporters say it could add needed revenue to the Golden State’s coffers".
Supporters of getting rid of California Liberals say it could add survivability to the country.
Given the opportunity, Cali would put a meter on each end of the digestive process and would get every taxpayer "coming and going"!
Democrats are evil, Mao is murder!
The boneheaded stupidity and economic ignorance of the legislature in Sacramento never fails to amaze me. All they'll do is drive the businesses, jobs and revenues to states without such greedy tax regimes. It's yet another "This calls for a stupid and futile gesture" moment.
Which means they'll probably pass it.
Government: We're all out of money.
Us: Because you spend too much to buy votes with special give aways.
Government: If we don't tax you more, we'll have to cut police and fire, and close hospitals and schools!
Us: Why don't you just slash useless pork projects and cut your salary, and balance the books instead of treating pension funds as slush money.
Government: Speaking of money, did we mention we're out?
"Taxation law and policy experts contend that the proposal may not even be constitutional."
When has the Constitution ever mattered to a tax and spend politician? Answer: It doesn't. They'll ram-rod it through somehow and then whine and blame someone else when all the unintended consequences begin to happen.
Common sense is in very short supply in California. Of course the web retailers are going to pull their ads. They're in business to make money and you can't do that by believing in Unicorn Economics!
Sorry California, but a state charging sales taxes on purchases made in another state is NOT Constitutional. States try to invoke this type of tax again and again and again. The Supreme Court has stricken similar laws down on a number of occasions. What a waste of the high-court's time, because it will probably have to go there again.
See the U.S. Constitution Article 1, Section 9, clause 4 — that says:
" — No Tax or Duty shall be laid on Articles exported from any State. — "
The Founders couldn't have made it any clearer than that.
The inferred images of 'hard to stop', 'continuing to come after us', and 'eating our brains' are not far off either….
And what exactly is wrong with CUT SPENDING?
If this passes, sell your eBay stock pronto!
Hey is there SC cases that ruled on this? It seems like this would be significant if the SC has ruled the way you interpreted … Do you have a case cite?
Inquiring minds would like to know … Any lawyers around who know? This would surely prevent States from raiding others for their funding.
What 's the old adage? If you want less of something – tax it? Brilliant plan California, brilliant.
Read about Obama's *EPIC* Los Angeles TRAFFIC JAM http://www.thewrap.com/television/column-post/pre...
makes sense,states could begin tariff wars to beat downs rivals. cartels could form, chaos would ensue.
Yep, it's just common sense … But did the SC actually sign on?
And what would Kagan say?
Go ahead California and do that, it will be interesting to see how many of the internet businesses and entrepreneurs suddenly decice not to sell their products in California or decide to pack up and depart the "Golden State" for more hospitable locations.
For those considering relocation, think Texas, it may be hot here but we've a good tax structure and like business.
No, I'm sorry I don't have the cites. If I was at home and had access to my reference file I might be able to find at least one of them. But there should be several. And any Constitutional tax lawyer worth his salt will find them pretty darn quick. I believe the last time the Supreme Court visited this was about 20 years ago, and here it is back again already.
The Constitution has got it covered — It is written in the Constitution as another commenter stated … It's not the commerce clause, it is Article 1, Section 9, Clause 4 … it reads
"No Tax or Duty shall be laid on Articles exported from any State."
You can't touch revenue from another state.
It seems like the CAL legislators are walking thru the woods looking for where there are pockets of money they can step into, and then finding a way to get it.
Do what is best and improve what you actually HAVE, don't take more.
Putting taxes on the internet people that derive revenue from ads will also complicate life since the pursuit and prosecution of tax-evaders (knowing or unknowing) will add additional cost to the state balance sheet that will NOT be paid from the collected taxes.
California needs to file for bankruptcy. Only a bankruptcy judge can scale back these entitlement programs and undo the state worker pension plans written into the state's constitution. The legislature is NEVER going to curb spending on their own. They're addicted to it like any hard core junkie. CA voters lack the intestinal fortitude to oust the Progressives so change at the ballot isn't going to happen. I think we need to file for bankruptcy now…though I'm open to alternative suggestions.
Every single problem that California has, is just a symptom of a terminal disease.
This internet tax is one more, the symptom of "we screw-up so lets get other peoples money."
Why can't the voters of California figure out that the root cause of the disease is their destructive, repetitive behavior of electing Liberal/Progressive Democrats.
Oh Yeah….if they don't reelect them, they'll have to give up all that "free" stuff, like sanctuary for illegals, outrageous pensions and salaries, hand-outs to the lazy.
That is the Dems modis operandi for securing votes, isn't it.
California voters are like drug addicts; they don't care that their habit will kill them.
Kagan will ban military recruiting EVERYWHERE, whip off her robes showing her off softball uniform (cather/1st base/clean up), and go get "streched out" for the D.C. League doubleheader that afternoon.
And that's "Justice PepperMint Patty" to you sir.
That's what GM should have been forced to do, that what Bankruptcy Courts are for, what the heck?
In addition to being unconstitutional, can you imagine how difficult that would be to enforce? The bureaucracy that would have to be created would be enormous. Some business in Tennessee would have to be sued to collect CA taxes and the only reason they're doing this is because CA residents refuse to self-report out-of-state purchases. Besides, the CA legislators have created the atmosphere where shoppers buy out of state to avoid the confiscatory taxes. I know I've saved a lot thanks to other state retailers. Eflat123456 said it well: CA pols are addicted to spending. Hell, if they got the money from internet sales, they'd blow through that, too.
Grandmothers will be forced to eat cat food. You can't have that!!! (sarc)
Can't deprive some poor bureaucrat of his perks and his empire can we?
Or cut some elected official's constituency off from the taxpayer's money?
Man I could sure use some GOOD news for a change. I sit here and shake my head because of ONE MAN and an ideology, America as we knew it is nearly gone.
An election will not solve the problem unless the "whole" of our government changes. Do you think that is likely?
I see and hear alot of great idea's, but no way to implement them.
Sounds to me like a great opportunity to start a "re-mailing" service in AZ.
California, only you voters who pay taxes can stop your misery. If you don't then the best thing that can happen is for the really, really big one to hit and the rest of the US can wave goodbye as the $h!tpit you have created slides off into the Pacific.
Does CA have a budget problem? Uhmmm..hey, I have an idea …..WHY DON'T YOU CUT EXPENSES!!!!!!!! Corrupt idiots.
Because over half the state is dependent on the government – for them the government is a necessity. We had a similar problem in the late 1700's by a corrupt government penalizing the productive class to live in opulence on the backs of others. You people are naive if you think we can vote oursleves out of this mess. It's going to take more than that.
I agree. I think a change in the voting habits ( and they are just habits for the Useful Idiots ) is where it starts……..but, that in itself won't be an easy task or a quick one. It may not even be possible at this point but, I hope CA isn't dead, yet.
The solution is to stop selling in California. After all, the people there are too poor to afford anything anyhow, now days. Do you suppose the people there will EVER wake up and throw the marxists and illegals out? I'm betting no.
There some of us heir ins ze Peeples Republik that think the only solution is for the state to crash and burn so a leaner more efficient (not meaner) government can emerge from the bankruptcy. The current political leaders are schnooks all. Expect no solution from them other than rifling through sofas for loose change eventually leading to pickpocketing like this criminally stupid proposal.
There is the *joke* global warming *joke* that the rising ocean will give Nevada ocean front property.
WELL just let Califruitay just belly up… No fed cash anymore, they been fiscally floundering for so many years now it is pathetic. If they can't be solvent then they need to be absorbed. Take the cali/ Oregon border move it down some, move the Nevada and Arizona borders to the ocean, then dissolve the so called California state legislature.
Yes it may be unfair to the said states to have to take the bowl of fruits nuts and flakes, but ALL the states have been paying for their failures for far to long IMHO…. Plus it would give AZ. more border to do the those things we so love them to do
Its common sense, they refuse to use it.
What California needs is to cut spending, not look for new taxes. The same for Washington.
All governments are so broke they're just looking around to find where the money is. Gird your loins.
Any money sitting anywhere is fair game. Precautions for 401Ks and IRAs.
.
I guess NewEgg will be off my list. Time to start a church to exempt me. I'm going with 1st Socialist of the Latter Day Nobama.
I, for one, would love to see *Not Available In California* attached to every Online Order Form.
The United States of America does not really need California… California, it seems, does need the United States of America.
I was just thinking the same thing…talk about a niche startup company!
This would actually be a great reason for the country to boycott California so we can help support our friends in Arizona! I feel bad for the actual workers in California but it's up to them to put the pressure on those who spend the money. It's up to all of us to speak up and put the brakes on spending in our cities & States.
Directed targeted advertising in a locality or state creates nexus. National adverstising campaigns do not. That said, advertising on CA-based web sites is a grey area. Can a website ever truly be state-based with access for the country only a click away?
Typical ploy by the most libRETARDED state in the union. Hello BANKRUPT california! Try something new. Deport your illegals, stop your ridiculous entitlement programs, get rid of the CLOWNS you voted for that helped to create your mess, and most of all try some FISCAL RESPONSIBILITY for a change!
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